Beaufort County Council's Finance Committee took an important step toward greater financial stability with its vote to keep enough money in reserve to pay the county's debts for a year.
Doing so would allow the county to avoid default should disaster strike. It also could improve the county's credit rating, which would mean lower borrowing costs.
David Starkey, the county's chief financial officer, pointed out that the Federal Emergency Management Agency helps governments cover operating costs in the event of a disaster, but the money can't be used to pay debts.
In such a case, lenders would still expect to be paid, and the county might have to borrow even more to rebuild.
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The debt reserve policy recognizes the realities of the county's cash flow and the hurricane season, our most likely natural disaster. The interest payments on county debt come due in August and September, the height of hurricane season and a low point in cash flow. Real estate property tax bills, the largest source of income for the county, go out in October and are due by Jan. 15. Most of the county's revenue arrives in December and January.
Without adequate reserves, should a storm hit, it could put in jeopardy the county's ability to pay interest due then; damage to the county's tax base would make it very difficult, if not impossible, to pay principal payments due in February and March.
The county also knows that FEMA payments won't roll in immediately after a storm hits.
All of this adds up to needing to make sure the county has enough money to keep its financial head above water at a very critical time.
A policy that makes sure those bills get paid and helps keep the costs of borrowing down merits the support of the full council.
Coming up with written policies for reserves is one of the council's annual goals. Still to come is a reserves policy for the county's day-to-day operations. We look forward to progress on that front, too.